EKF says 2012 will be a transitional year

Shares in EKF Diagnostics, the AIM-listed in-vitro diagnostics company, fell on Wednesday despite the group appearing to beat analysts' forecasts in 2011.

Revenues more than tripled from £6.5m to £21.7m, helped by 64% growth in EKF Germany and 144% in its Quotient division.

While margins improved from 45% to 48%, the loss before tax widened from £2.1m to £2.4m due to the acquisition costs associated with the purchase of Stanbio in June.

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Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose to £1.6m from £.10m.

Collins Stewart, EKF's house broker, upgraded its 2012 adjusted EBITDA forecasts by 6%. The broker has a target price of 43p for the shares.

"We expect solid trading in 2012 to be supported by updates on new product

launches, product in-licensing and distribution agreements providing positive

momentum. A distribution deal for QuoLab, which we expect to be signed in

2012, would likely result in a significant positive change to estimates," the broker said.

Peel Hunt, meanwhile, noted that the figures were in line with twice upgraded forecasts.

"Sales more than tripled to £21.7m, driven by a six-month contribution from Stanbio in the US, growth in haemoglobin cartridge sales and capital sales to developing markets (Peru, Mexico)," Peel Hunt's Dr Paul Cuddon said."Net cash of £5.3m is ahead of our expectations," Dr Cuddon added.

"EKF Diagnostics has assembled a strong direct sales presence and distributor network, with a portfolio of products the key to driving significant operating leverage," Dr Cuddon opined.

The shares trade on an undemanding two times enterprise value/sales, underscoring Peel Hunt's "buy" recommendation and 35p target price.

Meanwhile, the company stressed that "it is important that our 2011 result is seen in context and that none of us get carried away with a heightened sense of expectation. 2012 remains a transitional year."

Shares were down 3.14% at 27p.

BC/jh